Alternative Funding: What You Need to Know Before Outsourcing Your Business Model

Posted: 5/13/2013 | By: Rob Tornoe

Anyone who has been part of a newsroom during the last five to 10 years understands all too well the challenges facing modern journalism. Technological barriers, staffing issues, methods of delivery — all are valid concerns for any news organization trying to flourish in the modern media environment. But they are also all secondary to the largest problem facing journalism: funding.

Journalism in the mid-20th century was a fluke of advertising dollars, when cash-flush newspapers were able to fund every journalistic whim, and newspapers maintained ridiculous profit margins in the process. With the rise of the Internet, those days are long gone, and media companies now have to get creative when it comes to plugging the budget holes.

Ironically, as we look toward the future of funding models, one possible solution might have its foundation in the past. For years, we’ve tuned into our local public broadcasting station and sighed as hosts pushed their tedious pledge drive; asking listeners to pony up to support their newsgathering operations.

With the advent of online crowdfunding, newspapers and journalists are learning that the public media approach — asking the people who directly benefit from the news to volunteer the money to help develop it — may be a viable option to fund projects that would otherwise remain on the cutting room floor.

Take De Correspondent, an online-only Dutch news site and crowdfunding project started by Rob Wijnberg, former editor-in-chief of Dutch national newspaperNRC Next. De Correspondent got off the ground in March when Wijnberg pitched his idea for a new type of online journalism on Dutch television. Within just 24 hours, his team raised more than €1 million ($1.3 million) from more than 17,000 people who paid €60 (some donated even more) for an annual subscription to the news site, which is set to go live in September.

“We were overwhelmed, especially by how fast it was and especially by how much enthusiasm people showed for the initiative,” Wijnberg said. “People really mailed us lots of letters and sent tweets and everything saying that ‘I’m so glad you started this.’ We didn’t expect that.”

Crowdfunding has taken off in popularity over the last few years, giving journalists several options when looking for a platform to fund their efforts. RocketHub is a platform designed specifically for creative types with a focus on group funding, while Givezooks! is a crowdfunding option specifically for nonprofit organizations, including newsrooms. But if you’re serious about crowdfunding your journalism project, chances are you’ll turn to either Kickstarter or Indiegogo.

Kickstarter
Currently the most popular crowdfunding website, Kickstarter launched in 2009 and caught on immediately with both creators and donors as a low-risk option to fund creative projects. TIME magazine even listed it as one of the Best Inventions of 2010.

Increasingly, Kickstarter has become a powerhouse for crowdfunding journalism. To date, there have been more than 280 successfully funded journalism projects on Kickstarter (not including documentary films) and more than $2.9 million pledged to journalism projects. Think less comic books and band albums, and more along the lines of Narratively, which raised $53,739 to launch a digital publication devoted to sharing in-depth stories about New York.

“The journalism category on Kickstarter has been one of the more vibrant communities to fund projects in the last couple of years,” said Kickstarter spokesman Justin Kazmark. “There has been a tremendous amount of creativity from various journalists and newsmakers experimenting with form and content.” For journalists looking to crowdfund a project, it’s important to understand Kickstarter’s terms before committing to it as your primary funding platform. The first and most famous: All crowdfunding campaigns on Kickstarter are all or nothing. If you’ve set your campaign’s duration for 30 days and don’t reach your fundraising goal by the end date, sorry, you get nothing.

There are two other major guidelines that Kickstarter projects must meet before they are approved to go live. Every project must fit within one of the 13 creative categories Kickstarter offers. Journalism projects will likely fall under the publishing category, but there are other categories, such as art, comics, food, and photography that could also apply.

The other major guideline is that every campaign on Kickstarter must be a project. So a journalist looking to do human interest reporting in Sri Lanka must pitch the end result of the journalism, not the process itself. “There has to be a complete scope — a beginning and an end,” Kazmark said, adding that physical or digital perks given to donors will attract the most support for a project.

Another major consideration for interested creators is cost. While it’s free to post a project on Kickstarter, and it costs nothing if the campaign isn’t successful, Kickstarter charges a 5 percent fee for all successfully funded projects. On top of that, Kickstarter outsources all credit card processing to Amazon, which charges an additional 3 to 5 percent per transaction, depending on the size of the donation.

One major benefit to Kickstarter is the platform’s integrated social networking, which enables users to follow people they know, just as they would on Facebook. So, Kickstarter members are notified when a friend backs a project, allowing a second level of promotion to like-minded individuals who may not have heard about the project otherwise. With the site approaching 1 million users who have backed more than one project, it’s a powerful network and a huge source of potential funding.

Indiegogo
A popular alternative to Kickstarter’s restrictions is another platform called Indiegogo. Officially launched at Sundance Film Festival in 2008, Indiegogo started off with a focus on film projects but has since grown to encompass several creative categories that apply to journalists looking to fund their projects.

The biggest distinction between Indiegogo and Kickstarter is the ability to keep all funds that are raised, even if the established fundraising goal isn’t met. Indiegogo refers to this as “flexible funding” and charges a 9 percent fee on these campaigns, versus the 4 percent fee it charges for projects that reach their full goal.

“A common misperception about crowdfunding is that you need to raise all the money for your project at once, but it’s quite the contrary,” said Danae Ringelmann, co-founder and chief operating officer of Indiegogo. “Many campaigners just need to raise funds to get them to the next level, which is why even if a campaign doesn’t ultimately reach its target, it can still be a success.”

Another difference is that Indiegogo campaigns don’t have to be project based, as Kickstarter requires. Cartoonist Bill Day, whom I wrote about in January for editorandpublisher.com, was able to successfully raise $41,764 as his full-time salary for a year while he continued cartooning. On Kickstarter, this type of campaign would not have been allowed.

“We were created out of a frustration that people could not find funding for or participate in their life’s passions, because something stood in their way,” Ringelmann said. “At Indiegogo, there is no waiting, there is no one telling you that your idea isn’t cool enough, there is no playing favorites.”

Tips
According to Kazmark, 44 percent of all projects that launch on Kickstarter reach their goal. If a project reaches 20 percent of its goal, it’s going to be successful 81 percent of the time. So, how can journalists ensure their projects turn into success stories?

For starters, Kazmark suggests signing up to whichever crowdfunding platform best fits your project’s needs, and help fund a couple of projects yourself. By experiencing what it’s like to be a backer, you’ll have a better understanding of all the steps that go into marketing a project.

Next, make sure you’ve assessed all your costs properly before committing to a fundraising goal. Last June, nearly the entire staff of GOOD magazine was laid off. Instead of immediately sprucing up their resumes or pounding the pavement for work, the former co-workers decided to band together to create one last magazine. They turned to Kickstarter for their crowdfunding project and were able to successfully raise $45,452, three times their goal of $15,000.

However, had they only reached their goal and not a penny more, they would have ended up losing money on the effort. The entire cost to produce their magazine, Tomorrow, including printing, shipping, and everything else, was $38,479, well above their $15,000 goal. Luckily, with the money raised on Kickstarter, and some additional income sources such as online sales of the magazine and sponsorships from MailChimp and Flipboard, they were able to cover all costs and eke out a small profit for everyone involved.

Another important factor in having a successful campaign is producing a short video to go along with the pitch. Both Kazmark and Ringelmann agree this is one of the most essential aspects to a successful campaign. Ringlemann said that Indiegogo campaigns with videos raise 114 percent more money than those with no video.

“People want to fund people, not just ideas, so it’s important for you to tell potential contributors why your project is important to you and about the impact that it will make on the world,” Ringelmann said.

Ringelmann and Kazmark both said they encourage journalists to be proactive in promoting their crowdfunding campaign. “Getting the word out is important so people feel inspired to share your story with their networks, growing your donor base, and ultimately funding your project,” Kazmark said.

A key to crowdfunding is that you have to depend on your own networks to get the word out, not the platform you’ve chosen. While both Kickstarter and Indiegogo feature stories on their front page and promote via social media, at any given time there are hundreds of projects vying for attention, so you can’t depend on anyone but yourself to get the word out.

Indiegogo has found that campaigns that send out updates every one to five days raise an average of 100 percent more than those that don’t. Ringelmann said this is especially important for journalists trying to fund news-based projects, as there is a lot of media coverage of journalism trends and the news media that campaigns can take advantage of.

“Send them a new writing sample or ask them to promote the campaign on their social networks,” Ringelmann said. “Journalists’ funders want to stay in the know and by doing so, campaign owners will be able to keep their contributors active and engaged.”

Perks are also an important part of the pitch, and the best reward is a perk that narrows the distance between the journalist and the audience. On Kickstarter, the most common pledge is $25, and the average pledge amount is $71, so that sweet spot in between is where most projects should focus to have the best chance at success. This means developing perks that could attract donations to that level. Maybe it’s a copy of the book or magazine that sums up your project, or maybe it’s a T-shirt to go along with an e-book or website membership.

A successful crowdfunding exercise is just the first chapter. If your pitch is successful, you’ll be left with a community of supporters. Sharing information along the way with donors to keep them in the loop is almost as valuable to them as the ultimate project you’re looking to produce.

“In addition to the perks and end product, backers really want and value an all-access pass to the creative process,” Kazmark said. “To them, it’s not just about bringing a new project or idea to light, but being part of the process that sees it come to fruition.”

Rob Tornoe is a cartoonist and columnist for Editor & Publisher and can be reached at robtornoe@gmail.com.